I tried a rough calculation a while back on the rosy board that tried to take into account the updated metals prices and the exchange rate (since the cheerleaders were all excited our exchange rate had improved and it would "add value" haha) to see what the cumulative effect would be. Here's the short form, I'll save you all the link to Agoracrap (FYI some of the numbers may be a few months old):
Them:
"The dollar is down and that adds significant value. The price of copper is down and that reduces the value. The price of fuel is down and that adds value."
Me:
Looking at this statement (and the few factors it contains) alone, one would be inclined to believe that the value of the project has gone up. But is that really true? Let's look at the factors described in the economic results of the BFS:
Summary of Economic ResultsItemUnitBase Case3-Y Avg* CaseSpot Price** CaseReal Options CaseMetal Price
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| Copper | US$/lb | 3.25 | 3.63 | 3.69 | 3.25 | | Gold | US$/oz | 1,445.00 | 1,445.00 | 1,736.00 | 1,445.00 | | Silver | US$/oz | 27.74 | 27.74 | 32.71 | 27.74 | | Molybdenum | US$/lb | 14.64 | 14.64 | 11.34 | 14.64 | | Exchange Rate | US:Cdn | 0.97 | 0.99 | 1.02 | 0.97 |
Now what are those numbers today?
Copper: 3.06
Gold: 1168
Silver: 16.15
Molybdenum: 9.53
Exchange Rate: 0.87
Now the base case NPV 8% was 513 million (NPV 5% = 1694 million) when the BFS came out at the base prices described above. So the question is do all of you really think the exchange rate (and perhaps some slight change in fuel costs) will negate the drop in every metal price? Fair enough if you want to believe it will but at least try to examine more than a few aspects. I'm sure there are even more factors not taken into account here that will play a role (positive AND negative). But as it stands today at these metal prices I have yet to see a compelling argument that we are worth more than the numbers in the BFS.
Then I essentially calculated what the change in NPV for each of the factors below based on the sensitivity figure in the BFS. Since the sensitivity analysis is linear (for each change in commodity price/exchange rate) all you need to do is figure out the equation of the line. Once you have that you can plug in any percentage change in the commodity price from the BFS Base Case and it will spit out the new NPV 8%. See calculation below and my conclusion a couple months back:
(All Line equations were calcuated by interpolating NPV sensitivity in Fig. 22.2 from the BFS): (Bold values were interpolated)
| Point 1 | Point 2 | | | | | | y (NPV) | x (% change) | y (NPV) | x (% change) | slope (y2-y1/x2-x1) | line equation | | Cu | 0 | -9 | 513 | 0 | 57.000 | | NPV = 57*(% change) + 513 | | Au | 0 | -24 | 513 | 0 | 21.375 | | NPV = 21.375*(% change) + 513 | | Ag | | | 513 | 0 | | | | | Mb | 513/2 | -20 | 513 | 0 | 12.825 | | NPV = 12.825*(% change) + 513 | | Exchange | 0 | 7 | 513 | 0 | -73.286 | | NPV = -73.286*(% change) + 513 |
| BFS Price | Today's Price | % Change | | NPV Effect (New NPV for % change in price) | Change in NPV | | Cu | 3.25 | 3.06 | -5.85% | | 179.77 | | -333.23 | | Au | 1445 | 1168 | -19.17% |
| 103.25 | | -409.75 | | Ag | 27.74 | 16.15 | -41.78% | | | | | | Mb | 14.64 | 9.53 | -34.90% | | 65.35 | | -447.65 | | Exchange | 0.97 | 0.87 | -10.31% | | 1268.52 | | 755.52 | | | | | | | | | | | | | | Cumulative change in NPV (exchange, Cu, Au, Mb) | -435.11 |
So basically the drop in the exchange rate, didn't make up for the drop in metals prices at those values. I haven't had time to update the calculation... |
